Greek banks 'victims' of stress test delay: National Bank deputy CEO

LONDON Wed Feb 19, 2014 11:08am EST

Greek Presidential Guards stand in front of the Parthenon temple during the flag hoisting ceremony at the Acropolis hill in Athens November 21, 2013. REUTERS/John Kolesidis

Greek Presidential Guards stand in front of the Parthenon temple during the flag hoisting ceremony at the Acropolis hill in Athens November 21, 2013.

Credit: Reuters/John Kolesidis

LONDON (Reuters) - Greek banks ability to lend and make plans is being hampered by a long-running row between their government and the country's international lenders over how much more money they need, the deputy chief executive of the country's largest bank said.

National Bank of Greece's Petros Christodoulou told Reuters in an interview that delaying lending may stymie an expected tentative return to growth in 2014.

"Banking is the heart of the economy and if the heart does not supply liquidity to the Greek economy the latter will falter," he said.

Banks were relying on media reports for clues on the results of stress tests that were completed late last year and due to be published in December, Christodoulou said.

Those reports put capital demand anywhere between 4.5 billion euros ($6.2 billion), reportedly suggested by stress test consultants BlackRock, and the 15 billion euros reportedly mooted by the International Monetary Fund (IMF), he said.

"To the extent that we do not know the results from the BlackRock tests, the Greek banks and the Greek economy are the victims," Christodoulou said.

Greek authorities and the so-called troika - European Commission, European Central Bank (ECB) and IMF - teams overseeing the country's 240 billion euro sovereign bailout have been haggling over the stress test results for weeks.

The issue is expected to be revisited again this week when the teams return to Athens to continue talks about the bailout.

Christodoulou said his bank had been holding back on lending until a fortnight ago, when it decided to push ahead with the launch of a campaign to lend 3 billion euros to small and medium-sized businesses.

"We said 'we cannot hold back any longer, we have to implement our business plan'," he said. "If the report (on capital needs) comes out and it stops us, so be it."

After six years of recession that saw the economy contract by about 25 percent. Bank lending in Greece fell by about 60 billion euros to about 300 billion euros between the end of 2008 to the end of 2012, according to data compiled by the ECB.

The recession has left its four largest banks, which are all majority owned by the state's bank bailout fund, grappling with vast loan losses which are the main focus of the tests.

Christodoulou said the percentage of loans that were past due was still rising and that he expected them to peak "in the low thirties", implying about a third of the banks' loans would be in default.

As well as making it harder for banks to lend, the stress test delays have forced a pause on Greece's bailout fund's plans to reprivatise No. 3 lender Eurobank.

The Central Bank of Greece declined to comment on when the stress test results would come out. Sources say a March announcement is likely.

(Additional reporting by George Georgiopoulos in Athens; Editing by Louise Ireland)

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.